Why central banks are doing what they must, and we should all be happy.
The Federal Reserve gets a lot of criticism from seemingly everyone these days. Trillions and trillions of dollars pumped into the faltering financial system on a scale that was never thought possible. More trillions given away to people and businesses to survive what is without a doubt the biggest economic crisis since records began. Even during the wars, there was movement of people and goods, at least in some parts of the world. Shutting billions of people into their homes was never part of anyone’s spreadsheet for tail risk analysis.
The world was (and maybe still is) so utterly imploding that we had people hoarding toilet paper and preparing for the abyss. Millions are infected, more millions are unemployed, and businesses are shutting down left, right and centre because they have no revenues. And then people complain about the level of the stock market. It is removed from fundamentals they say, it is all going to come crashing down to earth and who are these speculators who are buying this bear market rally anyway? It’s as if being long the FAANGs is all of a sudden akin to being a non-believer and the end is nigh.
Let’s be honest, the stock market can be as utterly irrational as it wants, but so long as it is up, then happy days. Think about all of the pension funds that need to pay out all of those ever-increasing liabilities, as its members are living longer, and the young are seemingly all unemployed? It’s a can called underfunded pension schemes, and we have been kicking it down the road for decades. From estimates given by some of the largest providers of retirement funds, the money is going to start running out sometime in the next two decades, and that was before the Coronavirus. Fact is, if the stock market does not bail us out, hundreds of millions of people are going to be receiving very little when they stop working and what is left of our massive holdings of zero yielding government debt.
So, we have asset price inflation, bubbles popping up everywhere as trillions of Dollars, Euros and Yen are printed to prop up the global economy. Of course, there will be winners and there will be losers. As ever, the world isn’t fair. Someone will have to pay for it, and if the politicians have their way, we will all be long gone before they could ever be held responsible. What else are we going to do? It is rather hoping that we can somehow survive and grow our way out of this disaster, or we let it all burn now until the entire house of cards that is the hugely leveraged and highly inflated global financial system comes crashing down. Long live free money.